Dec 19, 2009

Taxable Person

Income tax is imposed to taxable person in respect of its income received and accrued in a taxable year. So, income tax shall be exist and can be imposed if two requirements are fulfilled. The requirements are that there is any taxable person and there is income received and accrued by that taxable person.
There are three kinds of taxable person in accordance with Indonesian income tax law. They are individual taxable person, an entity taxable person and a permanent establishment taxable person. There is also undivided inheritance as taxable person.
An individual as a Taxable Person may reside or stay in Indonesia or outside Indonesia. An undivided inheritance as a unity constitutes substitute to Taxable Person, substituting those who have the right thereof, namely the heirs/heiresses. The purpose of designating an undivided inheritance as a substitute Taxable Person is to allow Directorate General of Taxes (DGT) to collect tax originating therefrom.
The term entity is defined as a group of persons and/or capital as a unity whether or not it conducts business or activity, including limited companies, limited partnerships, other types of companies, state-owned or local government-owned enterprises in whatever name, firma, kongsi, cooperative, pension fund, partnership, association, foundation, public organization, social-political organization or similar organization, institution, permanent establishment and other forms of entities including investment fund. Under Indonesian income tax law, permanent establishment is treated as a special taxable person, separated from an entity. Therefore, despite the similarity of its treatment with an entity, for income tax purposes, a permanent establishment has a special status and is not included in the term of an entity.

Resident Taxable Person and Nonredident Taxable Person
Taxable person is also divided into two kinds based on its residence or domicile namely resident taxable person and nonresident taxable person.
The term resident taxable person means an individual who resides in Indonesia or is present in Indonesia for more than 183 (one hundred and eighty-three) days within any 12 (twelve) month period, or an individual who in particular taxable year is present and intends to reside in Indonesia. For an entity, resident taxable person means an entity established or domiciled in Indonesia.
To meet the criterion of “present in Indonesia for more than 183 (one hundred and eighty-three) days”, an individual does not have to be consecutively present. It shall be determined by the total number of days the said individual is in Indonesia within a period of 12 (twelve) months since his/her arrival in Indonesia.
A Nonresident Taxable Person is an individual or entity residing or domiciled outside Indonesia, who derives income from Indonesia, through or not trough a permanent establishment. So, there are two kinds of nonresident taxable person namely permanent establishment taxable person and non permanent establishment taxable person..
If the income is derived through a permanent establishment, the individual or entity is taxed through the permanent establishment with respect to the income derived and the individual or entity shall maintain the status of Nonresident Taxable Person. Therefore the permanent establishment substitutes the individual or entity as Nonresident Taxable Person in fulfilling the taxation obligation in Indonesia.
In the case that the income is derived not through a permanent establishment, the tax is imposed directly to the Nonresident Taxable Person.

Commencing and Ending as Taxable Person
Because of the importance of status of taxable person in imposing income tax, it is also importance to stipulate when tax obligations of taxable person commence and ends. In accordance with Article 2A law No. 7 of 1983 concerning income tax as lastly amended by law No. 36 of 2008, commencing and ending of tax obligations of taxable person is as follows :
  1. Tax obligations of an individual resident taxable person shall commence at the time the individual is born, is present, or intends to reside in Indonesia and shall cease at the time such person passes away or leaves Indonesia permanently.
  2. Tax obligations of an entity resident taxable person, shall commence at the time the entity is established or domiciled in Indonesia and shall cease at the time the entity is dissolved or is no longer domiciled in Indonesia.
  3. Tax obligations of a permanent establishment, shall commence at the time the individual or the entity starts its business or engages in activities in Indonesia and shall cease at the time the businesses or activities through a permanent establishment are terminated.
  4. Tax obligations of an individual or an entity as non permanent establishment nonresident taxable person, shall commence at the time the individual or the entity derives income from Indonesia and shall cease at the time the individual or the entity no longer derives such income.
  5. Tax obligations of an undivided inheritance, shall commence at the time the undivided inheritance starts to exist and shall cease at the time the inheritance is divided.

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